Davies v Davies

On an appeal from a discretionary financial remedy order, an error in valuing one asset does not require interference if it did not affect the overall fairness of the award. The court may consider a concession protecting a proportion of pre-relationship or inherited assets. Where a business is valued separately from its premises, its goodwill may reflect both the premises and the personal contribution of its operators. Lease security, its wasting nature and the effect on the freehold may affect the assessment. An appellate court should not undertake a speculative valuation where the evidence is inadequate and it is no better placed than the first-instance judge.

Following a short marriage, the High Court District Registry awarded the wife £2.2 million and the final matrimonial home. The husband appealed, arguing that the hotel business transferred to him by his parents at the start of cohabitation had substantial pre-existing value and should, like his pre-existing one-third interest in the hotel freehold, have been excluded from the assets subject to sharing. He also challenged the finding that the business had effectively no value at that time. The central issue was whether the alleged valuation error rendered the discretionary award unsafe.

Lord Justice Thorpe delivered the leading judgment. Elias and Rimer LJJ agreed with the result. Permission to appeal was granted, but the appeal was dismissed.

1. The judge had erred in treating the hotel business as having no value when it was transferred to the husband. That error did not infect the ultimate order. The wife had conceded that one-third of the total net assets should be extracted and protected from her claim. The judge acted on that concession, and the result gave the wife approximately one-third and the husband approximately two-thirds of the available assets. That division fairly reflected the derivation of the hotel and its trade. In light of the judge’s strong findings about the wife’s contribution, a smaller award would have been plainly unfair.
2. Elias LJ accepted that the financial information indicated that the business had some value. However, there was no reliable expert valuation or established method by which the value could be assessed. The appellate court was no better placed than the judge to undertake a fresh and speculative valuation. In considering a hotel business separately from its buildings, goodwill may lie partly in the premises and partly in personal goodwill generated by the operators: Whiteman Smith v Chaplin [1934] 2 KB 35. A lease could enable exploitation of the goodwill and provide security, but its wasting nature and lack of renewal right limited the business value. The lease also reduced the value of the freehold, so the husband could not claim both an unencumbered freehold value and the full business value.
3. Rimer LJ agreed that, even assuming the judge’s valuation assessment was wrong, there was no sound basis for appellate interference with the discretionary order.

• Court of Appeal (Civil Division) — Permission to appeal granted; appeal dismissed: [2012] EWCA Civ 1641.
• High Court District Registry — His Honour Judge O’Dwyer, judgment dated 20 September 2011, awarded the wife £2.2 million and the final matrimonial home.